ASK US: Why haven't natural gas rates fallen in Huntsville?

A Huntsville Utilities worker checks the natural gas meter on a home. (The Huntsville Times)

Q: I know that natural gas prices have gone down 20 to 50 percent over the past year yet no reduction in my natural gas utility bill has resulted. I sent an email to Huntsville Utilities Customer Service asking about this anomaly and have received no reply. Could you find out who is the appropriate party to contact regarding this dilemma? - Frederick J. Uhl, Huntsville

A: "We are looking at what we can do for the next heating season," said Bill Yell, spokesman for Huntsville Utilities, who pointed to a number of circumstances that affect the rates customers pay for natural gas.

The natural gas prices people often see quoted in the media are spot market quotes for gas sales on the New York Mercantile Exchange. Right now the spot price is low for at least two reasons, said Yell.

Nationally, the demand for natural gas has been lower than normal because of a mild winter. Many utilities did not use all the gas they had under contract, he said, and Huntsville Utilities still has gas in storage. In addition, supplies have expanded greatly because of the advent of fracking, which allows extraction of natural gas from previously untapped rock formations.

One potential development that could put pressure on prices in the spot market this summer is whether power companies will turn from coal to cleaner burning natural gas to produce electricity, Yell said.

To reduce risk and smooth out sometimes wide swings in the spot market, Huntsville Utilities, as do many other utilities, buys natural gas under a contract that locks in rates. "You can play the spot market but it is very dangerous," said Yell.

Huntsville Utilities and most utilities buy part of their expected natural gas needs throughout the year. Natural gas futures are one of the most volatile commodities traded in the world, and utilities have learned they must hedge parts of their needs before the peak heating season to provide a stable rate and secure supply to customers. This is called "hedging." Failure to hedge can result in disaster for consumers who are fully exposed to the fluctuations of market prices and the potential lack of supply because of weather such as hurricanes that can interrupt production on off-shore platforms.

Transporting the gas from the supplier to North Alabama and Huntsville is another part of the cost. Huntsville Utilities spends about $7 million to $8 million a year on storage and transportation to ship gas through pipelines from the Gulf Coast. Also part of the rate are distribution costs, administrative costs, maintenance and capital investments costs, and a 6 percent in-lieu-of-tax payment made to the City of Huntsville.

Huntsville Utilities' cost for transmission and distribution has been 28 percent of the residential rate, compared to 46 percent nationally. The rest of the rate is the cost of the gas.

Q: I saw the story about the graffiti on Rainbow Mountain. What's the history of the mountain and how did it get that name?

A: Rainbow Mountain got its name from Elisha Rainboll, who settled on the north end of the mountain about 1810. The mountain is part of an old geologic formation and is an outlying formation of the Cumberland Plateau. Its base is Tuscumbia limestone, and it has a Hartselle sandstone cap.

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